Zero Short-Term Rates Going Nowhere

WASHINGTON, D.C. (New York Times) – It was the most optimistic assesssment of the economy in more than a year. Still, the term the Federal Reserve used Wednesday to describe the good news was “leveling out.”

The Fed said it will keeep its benchmark short-term interest rate at virtually zero for some time. At the same time, it announced it would end the program to buy $300 billion in Treasury bonds by the end of October.

“The federal government appears to have decided to postpone the recognition of the losses that banks have incurred. It appears that we are now going to amortize those losses over a period of years, and keep interest rates low to allow banks to earn their way out of the losses they have incurred. I would expect rates to stay near zero easily through the end of this year.”